In the March 2009 edition of Legal Directions, we reported on
the decision of the Western Australian Court of Appeal in the above
case. Parts of the Court of Appeal's decision have now been
appealed to the High Court which delivered its judgment on 2
December 2009. The decision of the Court of Appeal has been upheld
with the High Court finding that 'other insurance' clauses
are void only where the insured is a party to the other insurance
contract and that parts of an 'other insurance' clause
which do not have this effect remain valid.
The appeal to the High Court
In the High Court, Zurich challenged the finding of the judge at
first instance that section 45 of the ICA only applied where the
insured was a contracting party to the other insurance, arguing
that it also applied where the insured was merely a beneficiary of
the other insurance.
Zurich also challenged the Court of Appeal's finding that
part of an 'other insurance' provision could be severed,
leaving another part unaffected by section 45.
The High Court unanimously agreed with the view of the judge at
first instance (unchallenged before the Court of Appeal) that
section 45 of the ICA only applied where the insured was a
contracting party to the 'other insurance'. French CJ,
Gummow and Crennan JJ reached this conclusion after an analysis of
the Australian Law Reform Commission's 1982 Report on Insurance
Contracts which gave rise to the ICA, the Explanatory Memorandum to
the Insurance Contracts Bill and sections 11 (non exhaustive
definition of 'entered into'), 48 (rights of non
contracting beneficiaries), 56 (fraudulent claims) and 76
(contribution claims) of the ICA. Hayne and Heydon JJ simply found
that this was the ordinary meaning of the expression used in
section 45, 'the insured has entered into some other contract
With regard to the second issue, the High Court was also
unanimous in finding that the effect of section 45 was only to
render the 'other insurance' clause void to the extent that
it concerned situations in which the insured was a contracting
party to the other insurance. French CJ, Gummow and Crennan JJ
reached this decision on the basis that the part of the clause
concerning contracting parties and the part concerning
beneficiaries were both 'provisions' of the contract and
that only the provision relating to contracting parties was
rendered void. Hayne and Heydon JJ found that section 45
'directs attention to a particular operation which the contract
would have according to its terms [and] renders that operation of
the contract void'.
It is helpful for the insurance industry to have these matters
definitively clarified by the High Court. It appears to be
acknowledged in the following passage from the decision of French
CJ, Gummow and Crennan JJ, however, that the effect of s45 is too
narrow to fully remedy the problem which the ALRC intended to
There is no distinction made in the
[ALRC] Report or the Explanatory Memorandum between "other
insurance" provisions purporting to affect double insurance
which included non-party insurance, and double insurance where the
insured is a party to the relevant contract. ... However,
notwithstanding the generality of the mischief to which section 45
was directed, the words "entered into" are not capable of
encompassing a non-party insured.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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